Agency 2

Question 1

What do you need to establish an agency relationship?

Answer 1

1) An agreement b/w agent and principal 2) That agent will act on behalf of the principal 3) Subject to the principal’s control

Question 2

Does an agency agreement need to be in writing?

Answer 2

No, only in a few special circumstances, e.g., property, power of attorney. Under the equal dignity rule, it only needs to be in writing if the underlying transaction needs to be

Question 3

What capacity is required to form an agency relationship?

Answer 3

1) Principal: capacity to consent to agency relationship & underlying transaction 2) Agent: capacity to consent to what he was appointed to do

Question 4

Employer vs. non-employer principals

Answer 4

1) Employer principals: greater control over detailed activities of agent 2) Non-employer principals: looser control over day-to-day activities

Question 5

Can minors be agents?

Answer 5

Yes, as long as they can manifest assent to agency

Question 6

Does an agency relationship require consideration?

Answer 6

No

Question 7

Independent contractor agents vs employee agents

Answer 7

1) Independent contractors agents: high level of independence 2) Employee agents: tasks generally completed under employer’s direction

Question 8

General vs. special agents

Answer 8

1) General: broad authority over many takss 2) Special: limited authority over maybe one single task

Question 9

Subagent

Answer 9

An agent who has been appointed by another agent to help with a task for the principal

Question 10

When can an agent appoint a subagent?

Answer 10

If agent has actual or apparent authority to do so

Question 11

Does the subagent owe duties to the principal?

Answer 11

Yes, a duty of loyalty

Question 12

Is the principal responsible for the actions of the subagent?

Answer 12

Yes, to the same extent he would be liable if the agent had taken the action

Question 13

Is the agent responsible to the principal for the subagent’s conduct?

Answer 13

Yes

Question 14

When is a principal bound by acts of the agent?

Answer 14

When the agent has actual or apparent authority, when the principal is estopped from denying an agency relationship, or when the principal ratifies the contract

Question 15

Actual express authority

Answer 15

Involves communication from principal to an agent, a manifestation to the agent that causes the agent to reasonably believe that he is authorized to act on behalf of the principal

Question 16

Actual implied authority

Answer 16

No explicit instruction from the principal, but the agent is understood to be given authority to contract for activities that are properly related the agent’s reasonable understanding of his objectives

Question 17

Implied authority to delegate

Answer 17

Normally, agents lack this power, except for: 1) Mechanical acts 2) Customary acts in this sphere of business 3) Acts impossible for agent to perform himself

Question 18

Apparent authority

Answer 18

Agent’s authority is derived from the third party’s reasonable perception of the authority granted to agent by principal

Question 19

When will an imposter bind the principal under apparent authority?

Answer 19

Only if it is negligent for the principal to allow the agent to have the appearance of actual authority

Question 20

Ways to terminate an agent’s authority

Answer 20

1) Terminate agency relationship 2) Revoke the authority as principal 3) Dramatic change in circumstances 4) Passage of reasonable period of time 5) Death of principal 6) Death of agent 7) Loss of capacity by principal 8) Breach of fiduciary duties by the agent

Question 21

When can the third party assert an estoppel claim?

Answer 21

1) Third party believes a transaction was formed for the principal 2) Principal intentionally or carelessly caused that belief 3) Third party incurs a detrimental change in position

Question 22

Requirements for a successful ratification

Answer 22

1) Principal must ratify the entire contract 2) Principal must have the legal capacity to enter into the deal 3) Ratification must be timely 4) Principal must have knowledge of all material facts

Question 23

How can a principal be vicariously liable for the agent’s torts?

Answer 23

1) Respondeat superior 2) Apparent authority

Question 24

How can a principal be directly liable for the agent’s torts?

Answer 24

1) Authorized or ratified conduct 2) Negligent agent selection & supervision 3) Non-delegable duties

Question 25

Respondeat superior

Answer 25

Principal is liable for the torts of an agent when: 1) Agent is an employee agent (“servant”) 2) Tort is committed by the agent in the scope of the employment

Question 26

When does an agent act within the scope of employment?

Answer 26

1) Performing work that’s been assigned by the principal 2) Engaging in a course of conduct that is subject to the principal’s control

Question 27

When is work-related travel within the scope of employment?

Answer 27

1) Driving to work for commute: No 2) Driving to work for a commute in a company car: Maybe, if company asserts control over how car is used 3) Travel from office to client meeting: Yes

Question 28

Frolic vs. detour

Answer 28

1) Frolic: personal errand that is a significant detour not within scope of employment 2) Detour: tiny deviation from route for a personal errand is within the scope of employment

Question 29

Vicarious liability for torts under apparent authority

Answer 29

A principal is liable for the tort of an agent when the agent’s appearance of authority allow him to commit a tort. Key elements: 1) Third party reasonably believes that the agent acted with actual authority 2) Belief can be traced to some manifestation by the principal

Question 30

Direct liability for torts that are authorized or ratified

Answer 30

A principal is liable if she authorizes or intends tortuous conduct by an agent

Question 31

Negligent hiring/control

Answer 31

Principal is directly liable if she negligently hires an agent or fails to provide reasonable supervision

Question 32

When does an agent become personally liable on a contract?

Answer 32

1) Third party knows about the existence of the principal but not her identity 2) Third party has no notice of the principal’s existence 3) Agent agrees to be personally liable

Question 33

Election of remedies doctrine

Answer 33

Once third party learns of principal’s existence, she must usually choose to hold just one party liable

Question 34

Agent’s warranty of authority

Answer 34

An agent purporting to bind the principal grants an implied warranty of authority to the third party. If agent lacks authority, then the warranty is breached and agent is liable for breach of contract

Question 35

Fraudulent concealment

Answer 35

Arises when either the principal or agent has notice that the third party would not wish to deal with the principal. If the agent nevertheless contracts with the third party for the principal and fails to make an affirmative representation about the principal’s identity, the third party may avoid the contract.

Question 36

Duties of a principal

Answer 36

1) Duty to treat agent fairly and act in good faith 2) Duty to honor the terms of any contract with the agent, e.g., compensation 3) Duty not to interfere with agent’s work 4) Duty to indemnify agent for losses incurred in connection with the agency relationship (except for losses arising out of agent’s own negligence or illegal acts)

Question 37

Duties of an agent

Answer 37

1) Duty of loyalty: avoid self-interested acts 2) Duty of care: reasonable diligence, measured by local community standards 3) Duty to obey principal’s lawful & reasonable instructions 4) Provide relevant information to principal 5) Keep and render accounts 6) Other contractual duties

Question 38

What does the duty of loyalty consist of?

Answer 38

1) May not deal with principal as an adverse party without principal’s knowledge 2) May not acquire an unapproved material benefit 3) May not usurp a business opportunity 4) May not compete with the principal 5) Duty of full disclosure & fair dealing 6) May not use confidential information for private gain